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Agile Contracts
15-07-2017
Contract
 What is a Contract?
 Do we Really Need it?
Real Life Contracts
Mangalyam tantunanena mama jeevana hetuna:
kanthe badhnami subhage twam jeeva saradam satam
“O my bride, the source of all my spiritual riches, I tie this auspicious thread around your throat,
which (shall be) the foundation and source of my life (hence forth). I bless that you may live for
hundred years. (And by this, I am blessed too as I pledge to be your partner in life)”
Agile Manifesto
 Customer Collaboration over contract negotiation
Triple Constraint
 Projects must be delivered within cost
 Projects must be delivered on time
 Projects must meet the agreed scope
 Projects must also meet customer quality requirements
Agile Principles
 Our highest priority is to satisfy the customer
through early and continuous delivery of
valuable software
 Deliver working software frequently, from a
couple of weeks to a couple of months, with a
preference to the shorter timescale
Fixed Price Contracts
 FPFS :Time and Cost are Fixed(Sometimes Scope
also)
 All the scopes are defined initially
 Extra payment for the changes
 Disadvantages
Sellers may try to cut the scope to deliver the
projects on time and within budget
Quality is not guaranteed for the customer
Risk to the Seller
Fixed Price Contracts
 Fixed Price Incentive Fee (FPIF)
 If project ends sooner, an additional amount is paid to
the seller
 Fixed Price Award Fee (FPAF)
 If performance exceeds the expectations, an additional
amount is rewarded to the seller
 Fixed Price Economic Price Adjustment (FPEPA)
 The fixed price can be re-determined depending on the
market pricing rate
Fixed Price Contracts
 Fixed Price per Iteration
 Requirements defined and agreed-on before the iteration
 Highly flexible or no predefined requirements
 Supplier has to give the clear estimates
 Scope changes is a risk
 Transparency, frequent deliveries can win customers
confidence
 Fixed Price per unit of work
 Feature Points, Story points
 This approach is not quite common
Cost Reimbursable Contracts
 Suitable for the projects without clear scope
 Payment as per the agreed time frame
 This model is rarely adapted
 Disadvantages
 Payment to be done as per the agreed timeline
 Supplier can raise unlimited amount
 Always beneficial for the supplier
Cost Reimbursable Contracts
 Cost Plus Fee (CPF)
 Agreed total cost for the seller plus a percentage of fee
over cost
 Cost Plus Fixed Fee (CPFF)
 Agreed fixed amount (for supplier)
 Cost incurred on the project is reimbursed on top of this
 Cost Plus Incentive Fee (CPIF)
 A performance-based extra amount will be paid
Time and Material
 Scope not detailed initially
 Cost based on Hourly/Man Days
 Anytime Scope changes
 Customer decides the End date of the contracts
Progressive Contracts
Variable Price Variable Scope Progressive Contracts
 Flexible contracts
 Suitable for Agile projects
 Define the cost per iteration but not scope
 Termination can occur at any time
 Based on the relationship, the projects can continue
indefinitely
Target Cost Contracts
 Share a % of profit of the target cost
 Supplier to bear the overrun cost if not met the expectation
 Target cost is clearly communicated
 Target cost can be set for the entire project or for the
particular unit
 Client needs to have a clear knowledge to accurately measure
the target cost
Profit Sharing Contracts
 Share an agreed % of benefits of the profit
 Motivates the supplier
ODC based Contracts
Agile contracts

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Agile contracts

  • 2. Contract  What is a Contract?  Do we Really Need it?
  • 3. Real Life Contracts Mangalyam tantunanena mama jeevana hetuna: kanthe badhnami subhage twam jeeva saradam satam “O my bride, the source of all my spiritual riches, I tie this auspicious thread around your throat, which (shall be) the foundation and source of my life (hence forth). I bless that you may live for hundred years. (And by this, I am blessed too as I pledge to be your partner in life)”
  • 4. Agile Manifesto  Customer Collaboration over contract negotiation
  • 5. Triple Constraint  Projects must be delivered within cost  Projects must be delivered on time  Projects must meet the agreed scope  Projects must also meet customer quality requirements
  • 6. Agile Principles  Our highest priority is to satisfy the customer through early and continuous delivery of valuable software  Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale
  • 7. Fixed Price Contracts  FPFS :Time and Cost are Fixed(Sometimes Scope also)  All the scopes are defined initially  Extra payment for the changes  Disadvantages Sellers may try to cut the scope to deliver the projects on time and within budget Quality is not guaranteed for the customer Risk to the Seller
  • 8. Fixed Price Contracts  Fixed Price Incentive Fee (FPIF)  If project ends sooner, an additional amount is paid to the seller  Fixed Price Award Fee (FPAF)  If performance exceeds the expectations, an additional amount is rewarded to the seller  Fixed Price Economic Price Adjustment (FPEPA)  The fixed price can be re-determined depending on the market pricing rate
  • 9. Fixed Price Contracts  Fixed Price per Iteration  Requirements defined and agreed-on before the iteration  Highly flexible or no predefined requirements  Supplier has to give the clear estimates  Scope changes is a risk  Transparency, frequent deliveries can win customers confidence  Fixed Price per unit of work  Feature Points, Story points  This approach is not quite common
  • 10. Cost Reimbursable Contracts  Suitable for the projects without clear scope  Payment as per the agreed time frame  This model is rarely adapted  Disadvantages  Payment to be done as per the agreed timeline  Supplier can raise unlimited amount  Always beneficial for the supplier
  • 11. Cost Reimbursable Contracts  Cost Plus Fee (CPF)  Agreed total cost for the seller plus a percentage of fee over cost  Cost Plus Fixed Fee (CPFF)  Agreed fixed amount (for supplier)  Cost incurred on the project is reimbursed on top of this  Cost Plus Incentive Fee (CPIF)  A performance-based extra amount will be paid
  • 12. Time and Material  Scope not detailed initially  Cost based on Hourly/Man Days  Anytime Scope changes  Customer decides the End date of the contracts
  • 13. Progressive Contracts Variable Price Variable Scope Progressive Contracts  Flexible contracts  Suitable for Agile projects  Define the cost per iteration but not scope  Termination can occur at any time  Based on the relationship, the projects can continue indefinitely
  • 14. Target Cost Contracts  Share a % of profit of the target cost  Supplier to bear the overrun cost if not met the expectation  Target cost is clearly communicated  Target cost can be set for the entire project or for the particular unit  Client needs to have a clear knowledge to accurately measure the target cost
  • 15. Profit Sharing Contracts  Share an agreed % of benefits of the profit  Motivates the supplier ODC based Contracts